ExpertSpeak: Shishir Asthana, an independent investment banker
The recent debacle in the five state elections will definitely be behind Finance Minister Pranab Mukherjee’s mind as he sits to give the finishing touches to his budget.
The writing is very clear on the wall, the central government will not only need to talk but also walk the talk in his budget.
There is a very strong likelihood that the government may now be forced to announce a populist budget. This can be bad news for the economy. With the deficit likely to touch anywhere between 5.8% and 6%, the government has little room to offer freebies.
But as has been the trend with this government, it has never learnt from its mistakes. With just two budgets before the central government goes in for election, the finance minister will be laying a roadmap for the final show.
The consumers, however, will have reason to rejoice as tax slabs are expected to be moved higher progressively. Taxation of consumables is expected to come down.
There is also a possibility that the Food Security Bill might be announced with a roadmap to introduce it in a piecemeal fashion. This will drill a big hole in the government’s finances and stretch the already strained agricultural sector. The move, however, if announced will be beneficial to the agriculture sector and those companies that will be supporting the sector, like fertilisers, agrochemicals and tractors.
There is a lot more expectation from the industry in the current budget than has been over the last few years. Clarity is needed on key issues that have also put the economy on a standstill. Announcement on the land acquisition bill, mining bill, food security bill, the Goods and Services Tax, the Direct Tax Code and the Lokpal will be keenly watched.
Sectorally, reports say that the automobile sector might see a rise in excise duty for diesel vehicles, a hike in import duty on metals to protect the domestic industry and the slashing of the import duty on coal.
The key announcements are expected in the power sector, especially on coal. While the government has said that it is now a responsibility of Coal India to ensure the fuel’s availability, a whole lot of issues regarding logistics and pricing need to be cleared. The import duty on power generation equipment is another area that will be keenly watched.
Banking is another sector that will eagerly await Mr Mukherjee’s speech. Recapitalisation of banks, waiver of agriculture loans, new bank licences and tax sops for the housing sector are some of the areas where some sound bites are expected.
As far as investors are concerned, a removal of the Securities Transaction Tax for equity and derivative segments can help sentiment. Any reduction in the short-term loan rates will also go a long way in boosting sentiment.
Infrastructure boost is what everyone will be looking at. Apart from lip service a roadmap on implementation can go a long way in kick-starting the economy. This will no doubt be a tough budget to present by any finance minister but the government has little to lose after losing the election. It is probably a blessing in disguise for the government to finally get its act in place.
....more info
The recent debacle in the five state elections will definitely be behind Finance Minister Pranab Mukherjee’s mind as he sits to give the finishing touches to his budget.
The writing is very clear on the wall, the central government will not only need to talk but also walk the talk in his budget.
There is a very strong likelihood that the government may now be forced to announce a populist budget. This can be bad news for the economy. With the deficit likely to touch anywhere between 5.8% and 6%, the government has little room to offer freebies.
But as has been the trend with this government, it has never learnt from its mistakes. With just two budgets before the central government goes in for election, the finance minister will be laying a roadmap for the final show.
The consumers, however, will have reason to rejoice as tax slabs are expected to be moved higher progressively. Taxation of consumables is expected to come down.
There is also a possibility that the Food Security Bill might be announced with a roadmap to introduce it in a piecemeal fashion. This will drill a big hole in the government’s finances and stretch the already strained agricultural sector. The move, however, if announced will be beneficial to the agriculture sector and those companies that will be supporting the sector, like fertilisers, agrochemicals and tractors.
There is a lot more expectation from the industry in the current budget than has been over the last few years. Clarity is needed on key issues that have also put the economy on a standstill. Announcement on the land acquisition bill, mining bill, food security bill, the Goods and Services Tax, the Direct Tax Code and the Lokpal will be keenly watched.
Sectorally, reports say that the automobile sector might see a rise in excise duty for diesel vehicles, a hike in import duty on metals to protect the domestic industry and the slashing of the import duty on coal.
The key announcements are expected in the power sector, especially on coal. While the government has said that it is now a responsibility of Coal India to ensure the fuel’s availability, a whole lot of issues regarding logistics and pricing need to be cleared. The import duty on power generation equipment is another area that will be keenly watched.
Banking is another sector that will eagerly await Mr Mukherjee’s speech. Recapitalisation of banks, waiver of agriculture loans, new bank licences and tax sops for the housing sector are some of the areas where some sound bites are expected.
As far as investors are concerned, a removal of the Securities Transaction Tax for equity and derivative segments can help sentiment. Any reduction in the short-term loan rates will also go a long way in boosting sentiment.
Infrastructure boost is what everyone will be looking at. Apart from lip service a roadmap on implementation can go a long way in kick-starting the economy. This will no doubt be a tough budget to present by any finance minister but the government has little to lose after losing the election. It is probably a blessing in disguise for the government to finally get its act in place.
....more info